The Canadian economy has made some strides toward recovery. But it has been a rocky ride, and continued economic uncertainty has altered how many Canadians view their financial security.
According to Towers Watson’s 2011/12 Retirement Attitudes Survey, many Canadians remain concerned about their overall financial situation and indicate that they want to bolster their personal finances by paying down debt and cutting back on daily spending. And retirement security is increasingly top of mind, with 54% saying that it has become a more important issue for them over the past three years. The study also shows that Canadian workers have revised their anticipated retirement age upward, with 33% expecting to work longer. Two-thirds of respondents said they expect to work an additional three or more years.
Employees appreciate plans
Findings from the survey tell us that most Canadian workers are counting on a combination of personal savings (68%), social security (51%) and employer-sponsored retirement plans (roughly 40%, split between DB and DC) for retirement income. It also shows that many employees consider their employer-sponsored plans as their primary retirement savings vehicle. This should have Canadian employers taking note.
Given that the demand for skilled employees remains as strong as ever, employers should recognize the role that retirement benefits can play in employee attraction and retention. In the study, close to half of Canadian DB plan participants identified their retirement program as a key reason for joining their current employer—and a majority cited their plan as a compelling reason to remain. In contrast, only 30% of DC/group RRSP plan participants identified their plan as a key reason to join their current employer, with only about 40% saying their plan is a reason to stay in their current job. The appeal is even stronger among DB participants under 40 years of age, who were twice as likely as those with a DCplan/group RRSP to say their retirement program gives them an important reason to stay.
Information gap
But while having an employer-sponsored retirement plan is certainly a critical element in attraction and retention, the survey findings suggest that employees are looking for more help in planning for their financial future.
Many are unimpressed with their employer’s communication and education strategies. The study showed that fewer than 40% of employees think their employers are doing a good job of providing retirement tools and information. Specifically, employees indicate that they prefer to have access to personalized plan communication, such as face-to-face meetings, seminars and access to independent financial advisors as the most desirable forms of support. Unfortunately, Canadian employers have been slow to provide this type of help. While the cost of such communications likely plays a role, employers will need to find a balance or run the risk of potentially having financially strained retirement-ready employees working out of necessity rather than by choice.
With the prospect of a slow economic recovery, higher costs for basic necessities and fears about potential curtailments to government programs, many Canadians are reconsidering their personal responsibility for retirement preparedness—and expressing greater appreciation for the value of employer-provided retirement plans. At the same time, organizations are recognizing that worker preferences toward their retirement programs can be a key element in retaining a skilled and engaged workforce.
The study shows that Canadians prefer to remain loyal to their organizations, with the majority wishing to continue working for their current employers. But changes in retirement plan design or failure to communicate the benefits of the existing plan may jeopardize this loyalty.
John McIntosh is Canadian plan design issues leader with Towers Watson. john.mcintosh@towerswatson.com